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tv   FOX Business After the Bell  FOX Business  January 24, 2013 4:00pm-5:00pm EST

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nicole petallides, we have to start with apple, not because of my full disclosure but because a lot of people out there are suffering. you look how many different mutual funds are weighted heavily with apple. there are a lot of them. >> absolutely. all these fund that people own, you're looking at the stock here. just checking a moment ago, sitting at the lows of the day. could it be any worse for apple? they came out with numbers a complete disappointment for wall street. down 63 bucks. that is humongous. sandra: humongous drop there. from one tech giant to another giant microsoft. they're set to report in a few minutes. >> that is exciting waiting on microsoft. microsoft has been pretty flat going into the close. you can see it is in the wait and see mode for the quarterly report. david: let's talk about good news which is netflix, if you own netflix yesterday. sandy and were covering it. we couldn't believe the pop it had after-hours and exceeded that during the day trading. >> tissues for apple
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shareholders who are drying and need a cool cloth for the net flicks folks. david: extraordinary. 42%. >> completely beat the street. [closing bell rings] david: big, big moves verse. the overall market not moving all that big, but these big movers on both the upside and the downside. we have a mixed picture on all the indices here. we have the dow jones up 50 points. might settle around that mark. looks like it is settling a little lower, pulling back. the s&p up just a fraction right now. much less percentagewise than the dow jones. nasdaq of course taking all of that apple bad news in stride, leading that index down into negative territory. down about 23 points the russell 2000 having a little bit of a kick back from where it was yesterday, up 3 1/2 points. sandra: if the s&p david, holds onto the small little gain that it settled that is the 7th straight day of gains for the s&p 500.
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following apple's massive drop let's look how some names in apple's ecosystem performed. cirrus logic seeing a big declines. they derived more than 40% of the their revenue from apple. lpl makes displays as well. equal come. quite a few dropped. david: interesting they didn't drop as much as apple. we'll have much more on apple coming up. in the commodities pits, gold seeing a selloff more than $16. silver fell for the first time in eight sessions. morgan stanley lowering its 2013 forecast for both metals. that is what drew them down. sandra: while everybody was focused on those metals as well as technology today the financial sector really was the outperformer. two financial etfs hitting brand new 52-week highs. the uyg, whose top holdings include berkshire hathaway as well as jpmorgan and the kbe, whose top holds include comerica and huntington, big
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gainers there, david. david: all right. we are awaiting news from microsoft and starbucks. very important earnings news that could affect the value of those stocks. as soon as they come out we'll bring them to you live. we're also continuing to focus on apple, looking really rotten today after yesterday's disappointing report. now the analysts are reacting. some are cutting price targets by 40% but where were these guys yesterday? how does the biggest stock in the world, the price target on that stock dropped 40% in one day without getting some kind of a warning from the analysts? we'll be taubing to an analyst later this hour who sent up some smoke signals last week and says the stock won't see the 700s ever again. sandra: oh. a lot more from world leaders in davos the president of costa rica tells liz the key to business is favorable taxes. go figure. plus the governor the of the bank of israel on keeping his economy strong and safe
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in a very volatile region. david: microsoft is out. the numbers are out. adam shapiro, how do they look? >> well it's a beat on earnings, david, but a miss on revenue. earnings, 81 cents per share. the street was expecting 75 cents. revenue 21.46 billion. the street was expecting 21.53 billion. jumping in real quick on the press release they're talking about it, in the last quarter, in the server and tools business, saw increase 8.5 billion. the previouser, server and tools business reported 9.1 billion of revenue. 9% increase from the prior period year-over-year. we'll jump in to see how windows 8 is performing but they're missing on revenue. sandra: we'll keep watching the stock here in after-hours trading. looks like it is getting a little bit of a boost in after-hours trading so we'll keep looking at those numbers. keep in mind the revenues numbers fell short but the earnings per share did beat. it is a decent beat. it is six pennies. let's get to the market panel. scott bower in the pits of
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the cme group in chicago. we have brian sezi, gnp production analyst and, a chief investment officer at security wealth management. start at the cm e-trading pits with you, scott. your reaction here to microsoft. better-than-expected earnings. the stock appears to be moving higher in after-hours trading. what does this mean for the market? >> i think we have to digest like what you just said what cops out about windows 8. we see revenues were slightly short, very, very short. and also we see that the stock up, up about 1520 cents here. i think we have limited upside on this news, i really do. i think 28.25, 2.50 if we get decent guidance by microsoft will be the market. to the downside, 27 is a really a big number. it should hold 27 especially seeing we see revenues almost in line and earnings per share was a beat. so i don't look for much movement whatsoever, but the big thing is, windows 8 is
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their future, their immediate future. we've got to, we've got to see what they say about at that. and with the new tablet coming out in just a few weeks, how that will be integrated in. what they see sales there. but --. david: we've seen how, how they use windows 8 in the new tablet. the question with that market, we saw how apple was screwed into the tablets going to the ipad mini. it is a very risky territory, brian. although we should say microsoft is very close to its 12-month low here. i think it was 26 at one point. so it's a little bit above that. it was as high as 33, brian. do you think perhaps now is the time when a lot of investors will say, well, since it is near its low we will get in. >> that is great way to put it, david. i can't believe i say this i rather other than microsoft than apple. david: would you have that two months ago, just two months ago. >> i probably wouldn't have. the is i like the valuation.
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microsoft has underperformed google the past six months. keep in mind microsoft has a couple catalysts of the for example, right now, cfos losing up the cap-ex budgets. think will have money to use in microsoft products finally. everybody gives service a bad rap. the product is functional and works and offers something competitive to what apple does. david: shibani joshi has a few things to say what is happening with microsoft. go ahead, shibani? >> we were talking about the windows 8 licenses. the company revealed it sold 60 millionness ares to date. i would like to add i think this number had previously been unveiled. this is not a new indication or new update coming out of microsoft. a little bit of a disappointment we're not seeing anymore ratcheted up up in members. bing market share rising to 16%. i think as windows 8 one of our previously private guests talked about, 16.8 million is the one everyone was looking for.
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sandra: we're waiting for starbucks earnings. we should get those out very shortly. shibani i want to ask you one other thing when looking at the report from microsoft, you mentioned the 60 million number. we're also looking at microsoft overall as far as the technology sphere is concerned. everybody was concerned about the pc market obviously. what do you think this report will tell the broader market about pc sales in general? >> well i think it will reflect exactly what everybody has been saying and anecdotal evidence we've gotten from the industry as a whole. pc sales are declining. when it comes to windows, what we're also seeing as sort of a chicken and egg problem. there aren't enough devices out there that really show off or enable the windows 8 functionality. you need a touch-screen laptop or --. sandra: shibani? >> go ahead. sandra: let's jump in here. we have starbucks earnings. let's go to adam this breaking newsroom. what do you have? >> right in line but slight miss on revenue perhaps. 57 cents adjusted earnings per share. the street was expecting 57
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cents. in revenue street was expecting 3.48 billion. reporting 3.8 billion. couple things analysts are watching is comparable store sales. in the americas grew 7%. same-store sales they talked about globally up far greater than that. in the united states comparable sales, same-store sales up 7%. back to you, sandy. david: scott, let's go to you to talk about starbucks for a second. doug, we haven't forgotten about you. we'll get you to in just a second. first over to scott, what do you think about starbucks? >> at first take it looked like the number was actually disappointing. really importantly look at the same-store sales growth. the street was looking five 1/2, 0.6%. we're seeing it at 7% and much greater oversees in asia. that to me is a big positive. david: by the way, let me throw in here, forgive me, scott, starbucks is planning for the year 2013 to add 1300 new stores. that is a huge number of new
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stores that they're planning to come out with and a in a slow global economy. in order to maintain these goals, they're comparable sales growth figures are going to have to look pretty good, no? >> no, i absolutely agree. the one thing they do have going for them especially overseas and in china, we're seeing numbers come out of china recently showing maybe we've seen a bottom there, is the purchase of tivana because in asia, tea, not coffee, but tea is really the premier drink. that's where people go to spend their money. teavana is what really starbucks is basing a lot of earnings potential in china on over the next, five, ten years, really. but that number of new stores that is starting, that is actually a staggering number giving the economy. i actually think that is a bullish thing. i know the stock is down, it was down over a dollar. now it is down 50 cents. i think that is a great sign for starbucks. sandra: as you're speaking the stock is bouncing back a little bit.
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let's get doug daily is joining us as part of our market panel. you've been listening to all of this starbucks earnings look pretty good. they're opening new stores. microsoft beating on earnings. it looks like good news continues. do you see it that way. >> what i would simply say stocks are trading close to their 2007 highs. you have to ask yourself the question, how have stocks got up over 100% in 3 1/2 years? in my opinion it has all been about central bank stimulus and government deficit spending. without those two things and trillions of dollars the overall global economy wouldn't be where it is right now. i would also somely say that -- simply say the effects of deficit spending and central bank monetizaton of that debt is having a reduced effect every time they do more. my opinion as i look at data, the global economy is slowing. earnings growth is slowing. last year was the story of investors being willing to
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pay more but at the end of the year than the beginning of year for prices as pe multiple expansion occurred. think 2013 will be a much more challenging year not only stocks but --. david: let me force your hand on one issue here. do you think apple could be, everybody is looking at apple as though it is anomaly in otherwise healthy market, could apple actually be a forward indicator what might happen to the overall market? >> yes. apple's a great business. i own their products. they're a great story but i have to ask, does apple deserve to be the largest capitalized company on the planet, bigger than exxonmobil? i don't think so. david: we know it is not anymore. today it lost that status as the biggest. >> right. david: exxonmobil is bigger. >> right. david: is apple, what is happening to apple now, the fact that people saw the stock as way overbloated and people are coming back to earth in terms of pricing it, could that happen to the overall market, to both the s&p stocks and those in the dow? >> absolutely. we've been in a secular bear
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market for last 12 years. if you go back and you look, we're still trading at or below prices that were prevalent in 2000 and certainly in 2007. in secular bear markets, markets and stocks used to go from overpriced to dramatically underpriced. i still think we're on the way there in the secular bear market is not finished. sandra: brian, where do you sit in this conversation? i know you started to become pretty bullish on the markets a few weeks ago but yet your year-end target for the s&p is just 1510. that is not a huge rally. are you suggesting that stocks have much room to go here. >> real quick on starbucks. i think what you're seeing right now we knew the quarter because the analyst day was there, the big risk in my opinion is europe. i wouldn't necessarily buying off the results. but on the market i am still bullish. we'll ride the horse until basically it trips over itself the market is ignoring all the signs that would set off warning signals. dividend yield on the dow, five-year low. it doesn't care about economic data. wait for something to tell
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me to start selling stocks and it is not right now. sandra: seems like a dangerous game to me. i don't know. brian, doug dale, scott bower, thanks so much for joining us. >> thank you. david: so many people are wondering when the hell will i be able to sell my apple now? if you see it go down this far, i'm stuck because of the job i have. the fact is people are wondering whether that will ever recover. sandra: president obama nominating mary jo white to lead the sec. what does that signal for the sec's future? we'll go to the white house for more on the nominee. david: jeffries cutting its price target on apple from 800 all the way down to 500 in just one day. that is huge! so why was it still so high going into yesterday's report? what were so many analysts missing from the biggest company in the world and what happens now? we'll talk to an analyst who actually downgraded the stock last week. we'll hear from him coming up. ♪
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david: shares of microsoft falling after reporting earnings a few minutes ago. let's head back to nicole on the floor of the new york stock exchange. it was up, it was down. now it is down a little. go ahead. >> we certainly had the wait and see mode going into the closing bell. here it is. earnings per share of 81 cents beat the street. 75 cents. you see the closing value, 27.63. the bid ask is below that level. this has not done much in the past year. down 6%. we did get in the report here. a couple of thing to note second-quarter earnings did slip 3.78%. they said weaker sales in the business an entertainment division. the area of strength in revenue in the core windows business that's where they saw the strength. this is the first quarter that actually incorporates the surface tablet and of course the new windows 8 operating system. another thing we should note they said the xbox sales over the holiday season were not as good as they expected. xbox is popular game but not
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as popular they hoped. that is one thing that factored into the numbers. we saw the stock originally jump and then sell off. the bid-ask is below the closing value we saw at 4:00 p.m. back to you, dave and sandra. david: thanks, nicole. sandra: today president obama nominating mary jo white to lead the securities & exchange commission today. david: with this nomination the president is hoping to renew his call for tougher regs on wall street. peter barnes is live at the white house with more on this, peter? >> that's right, david and sandra. she would be the first federal prosecutor to lead the securities & exchange commission. she was the u.s. attorney for the southern district of manhattan during the clinton administration for about nine years. now that includes wall street of course. she was not known as a, big financial crimes prosecutor. nonetheless, she has a reputation for being very tough. the president spoke to that today in announcing his, her, nomination. take a listen. >> so i would say that is a pretty good run.
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you don't want to mess with mary jo. as one former sec chairman said, mary jo does not intimidate easily. that's important. because she has a big job ahead of her. >> the record that the president, the record the president was talking about there includes her team putting john gotti behind bars for the very first time. it took the teflon off the teflon don. she also prosecuted the terrorist behind the 199 world trade center bombing, including the leader, ramsey juice seven. she, after leaving the u.s. attorneys off became a white-collar defense attorney and her clients included among others ken lewis, the former ceo of bank of america. also today the president renominating richard cordray. richard cordray to be the head of the consumer financial protection bureau. he is a former federal prosecutor as well, former attorney general of ohio and for the last year he has been running the cfpb in a
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recess appointment, a controversial one. the president tried to get him through the senate. nominated him in 2011. senate republicans blocked his nomination because they want changes in the structure of the cfpb but the president going forward again. republicans initial response is, we still don't want him. so look for a fight on that one. david and sandra. sandra: peter is it looking more and more like richard cordray will make it through this time and they will try to reorganize the bureau itself or the idea of it? >> yeah. that's what republicans want. they want to try to use the nomination to force the president to the table to restructure. they want it to look like more like the sec right now it is just a director. they want a five-member sec. so if they can cut a deal on that, cordray could possibly get through but republicans have enough votes to block nomination. you have to get, they have 44 of them signed a letter saying they would oppose it.
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that is four more than they need to prevent a filibuster. david: i still sense a growing federal bureaucracy. once these babies are born they do nothing but grow. thank you very much. >> that is the numbers for a filibuster. david: gotcha. apple, of course taking a steep dive today. of course now the analysts are cutting price targets but where were they before the tech giant reported? so investors like you and me could act a little earlier? can the stock ever come back to where it was? we have lots more on apple coming up. sandra: all right. stay tuned for that. first the governor of the bank of israel tells liz how his country's economy managed to stay so strong in the face of economic and security issues from around the world. ♪ . copd makes it hard to breathe,
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sandra: why aren't we growing? by we mean the economies all across the globe? the u.s. is grinding along for sure, david. david: just barely making it. liz claman at the world economic forum in davos, switzerland with the ben bernanke of one country that beat some stronger nations in growth since the height of the crisis. liz? >> i have a question for you, since 2009 which country comes out on top when it comes to the growth rate competition? is it australia? is it the u.s.? is it israel? is it the eurozone? let me tell you it is israel, thanks in part to the vigilance of my next guest. he is the central bank governor of israel, stanley
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fischer. thanks for being here. >> thanks for inviting me. liz: that is pretty impressive, israel's growth rate since 2009, 14.7%. while australia everybody think is so strong is 10.7%. to what do you attribute that? >> we were in a very strong position before the crisis began. so our recovery was very quick and we were growing by the middle of 2009, and we have been growing about 5% a year before that. we came whack back to that rate for a couple of years. that grew us up to 14. liz: you have cut rates four times over the past several months? >> yes. liz: is that something to worry about? >> no, we believe in acting repreemptively. we saw signs of a slowing global economy. we thought it with be use phil -- use to provide juice to the economy.
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liz:. liz: benjamin netanyahu needs to put a coalition together to because he didn't have enough votes toe run the country. what is next for israel? what do you expect happens? will the political landscape make it more difficult for you in your job? >> well the key thing we have is independence. so monetary policy is under the control of the bank of israel. not openly me. there is a monetary policy committee, as in the fed. and other countries. but, what we'll be able to do will depend a lot on what sort of budget that the government puts together, the new government. and we have probably to reduce our deficit quite significantly, our budget deficit. so it will be tough. but, any government coming in which can put the budget in shape for three or four years would be well-sized to do that. liz: you are surrounded by enemies in many regards.
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it is always a worry with arab nations who at least some of them don't want to see israel succeed. plus now with iran you have got that situation. there is tension in algeria. what happened in iraq, benghazi. you know, how worrisome has that become? and does it affect any of the decisions you make at the central bank? >> well the, the fact that the security situation around us is changed, for the worse, in many ways, obviously affects the way the government behaves and will, has affected the defense budget. that is something we just have to taken into account. israel has been pretty successful in maintaining peace within the borders of israel. when i say pretty successful, i mean very successful. one feels safe in israel. i don't know when you were lost there, but you don't walk around worrying about something happen to you any minute now. liz: we want to thank you. stanley fischer, governor of
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central bank of israel for your time. >> thank you. liz: we'll see you again. with us every year in davos. back to you in in new york. sandra: thanks a lot, liz claman. david: we have lot more from davos later this hour. the president of costa rica telling liz how companies are flocking to her country because of the favorable tax structure. sandra: the house voted to temporarily raise the debt ceiling but the problem far from over. former fed vice chair alan blinder tells us why the debt ceiling is scarier than the fiscal cliff. ♪ . ♪ [ male announcer ] how do you turn an entrepreneur's dream... ♪ into a scooter that talks to the cloud? ♪ or turn 30-million artifacts... ♪
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the 2013 c-class coupe. ♪ starting at $37,800. ♪ sandra: time for a look at today's market drivers. it was a mixed day on wall street. the dow and s&p 500 extending gains while the nasdaq lost ground. the dow finishing higher for the fifth straight day in a row and s&p 500, its 7th straight day of gains. consumer discretionary and health care were today's top performing sectors while telecom and technology lagged. selloff in commodities as well as morgan stanley cut its 2013 outlook for both gold and silver. gold falling 1%, settling at $1669 a troy ounce while silver posted its first drop in eight trading sessions. morgan stanley saying silver
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should continue to outperform gold on a relative basis this year. the number of americans filing new applications for jobless benefits fell to a five-year low last week. initial claims fell by 5,000 to 330. economists had been expecting the number to rise to 355,000. david: well congress has voted to push back the nation's borrowing limit until may 19th, even implementing a no deal, no pay policy for both chambers of congress. prior to that vote, former federal reserve vice chairman alan blinder said the debt ceiling was scarier than the fiscal cliff. so does this still hold true and how does he think the u.s. can decrease its deficit? alan blinder is here with us now. its deficit and its debt. thank you, professor, for coming in. is the debt ceiling issue resolved in any way or is this all papered over? >> it is not resolved but the sword of damocles has been moved to may. i would rather have it hanging in may than february by a lot. >> but you say in your article in the
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"wall street journal", it was written just at the time they voted, that compromise should not be a dirty word. >> yeah. david: and we know where the president wants the republicans to compromise. some people say they did it at least a bit on the tax issue. what about the president compromising on spending? so far have we seen any evidence he has been willing to compromise? >> i think so. there have been too many deficit reductions plans before this last tax increase that were all spending. that was one. secondly, as you know, back in the good ol' days when boehner and the president were trying to strike a grand bargain, he was putting social security on the table even though a lot of people in his party weren't too keen about that. david: you know, we hear about spending cuts. when we look at spending, if we could put up the chart that we have of spending from 2008 to 2009, right up until 2012. of course tween we see that big increase of about $600 billion. that was because of that special stimulus thing.
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>> right. david: then we see the level about the same. i mean the stimulus never stopped. we hear a lot of talk about, oh, yeah, in the future we'll have a spending plan that will cut spending but the actual spending has not reduce. we should mention by the way, you were with the clinton administration when they really did cut spending but we're not seeing the actual cuts now. >> we're seeing a little bit of it. it has come off the top and there's more promise down the road. finally, to your main point, really, which is, that there hasn't been enough in total yet. and that's true. there has to be more in total. i would actually not like to see it happen this year. the economy is still weak. and federal spending by the way is falling. that has taken some of the demand out of the economy. i wouldn't like to sew a lot more taken, soon. but over the long haul, over the next 10 years, not to mention 20, 30, 40, we need to talk about take out a lot of spending. david: the fed's balance sheet, we just go word the
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portfolio topped $3 trillion for the first tile. does that sound like a lot? >> it sounds like a lot but for you and i that would be much too much. the federal reserve can print money and buy as much as it thinks is beneficial to the economy. this is not about the fed's p&l statement obviously. given where interest rates are sort of stuck around zero the best way the fed can think of now to stimulate the economy is to buy more assets, shrink risk spreads and thinks like that. that is what it is doing. david: so far we haven't seen the consequences of this money printing in terms of inflation although some people say there actually is inflation. the way it is calculated by the fed is wrong because when i go to the supermarket i do pay for it but when will we see some consequences for all the money printing, for the huge debts we're piling up, et cetera? >> start with the money printing. the debts are a different thing the money printing if
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it works according to plan, you say things don't always work according to plan, if it works according to plan you will never see them. why? because as the economy starts getting back to normal, we're still almost 8% unemployment and demand comes back, private sector demand comes back, the fed will draw that balance sheet down. it is going to destroy the monetary, central bank money. david: burn the cash it creates. >> you burn it with electrons. they are only electrons and they burn easily and they will burn them up. and it will never go into circulation. david: let's hope you're right. i wish your days were back when we had divided politics. republican house and a president who was a democrat but they seemed to be able to compromise. why can't we go there again? why can't we go back to days of good compromise? >> if you ask, i'm a democrat as you probably know. there are problems with both parties but i think republican party has been unwilling to compromise. now very recently they're showing some willingness to compromise.
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david: yeah. compromised on taxes. tell you the truth i see a lot of intransigence on part of democrats as well. >> there is untranssy against on both sides. compromise on taxes and spending. i was happy to see the debt ceiling thing put back to may if not further. david: professor alan blinder. thank you very much. sandy, over to you. sandra: apple getting slammed after its disappointing forecast. a long list of analysts just now cutting their ratings and price targets. why wasn't this done earlier? coming up we have an analyst who sent up a early warning last week. up next as well as back to davos, the president of costa rica tells liz how their tax policies are bringing in business from some big companies.
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>> i'm adam shapiro with your fox business brief. it was a mixed day on wall street but the s&p did manage to post its 7th straight day of gains. at&t reported fourth quarter results after the closing bell. earnings per share for the company fell a penny short of stilts coming in at 44 cents. revenue came in slightly better than expected, $32.6 million. officials at sac capital are giving investor an update on an investigation by the securities & exchange commission. that's what sources are telling fox business network senior correspondent charlie gasparino. sac said the it has answered the sec's wells notice about possible charges of insider trading and that the hedge fund will cover any and all legal costs and fines. investors say ssac officials that indicated that founder steven cohen would not be charged. that's the latest from the fox buzz
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david: so we heard about this with obamacare. where have all the medical device-makers gone? costa rica with very friendly tax rule for international business, dozens of these companies are setting up shop there thanks to a government that is open to business. sandra: our own liz claman is at the world economic forum in davos, switzerland, with the president of costa rica. liz: cameron, medvedev, and chinchilla. lauren chinchilla is costa rica's first female president and joining us here in our fox business studio on top of the commerce center and in davos, switzerland. what is it like? >> of course it is a privilege. i think this is a wonderful opportunity for my country because you have the chance, not only to learn from many interesting people about the
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best practices of many issues of the agenda but at the same time you can share your thoughts about how to do many things in best possible way. liz: look at costa rica. one of the things that strikes me recently is that, you know, medical device-makers in america, all over the world, are all setting up shop in costa rica. you have a very friendly tax structure. what would you like to impart to people how that works and why it's important and what kind of business it has drawn to costa rica? >> well, let me tell you that we are a success story from the point of view of attracting investments. we do not only have look to attracting companies from the medical devices, sciences, and also from the industry and high-tech industries. what is the key factors,
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which are the key factors? first, as you said, we have special regime in free tax zones, areas. liz: taxes can come up and establish a headquarters? >> we have a special regime. everything is according to the world trade organization rules. but at the same time, i would say that probably the most important factor is the quality of our human resources. they add value to everything they do. we are very competitive from that point of view. we decide to invest in education very early as a nation. this is the result of these very good decisions. liz: you look what is going on in costa rica, what is going on in the united states. you wanted to have fiscal reform and really become more stream lined. and yet, it hasn't exactly happened the way you like. >> right.
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david:. liz: who is standing in your way? >> the opposition party is sometimes very hard, political dialogue is something very tough. i will say that --. liz: we know that in america. >> but we're also having our problems. and so also we were able, finally to get the votes because the opposition decided there were some issues. so we were not available to have the fiscal reform. we applied a very responsible expenditure policy we have been able to keep the fiscal problem very well-contained. liz: i looked at your resume' and you have dedicated much of your public life to the public sector and serving. you sat on a lot of boards to help with the problem of drug trafficking. mexico, it is going through such a nightmarish time.
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>> this is true. liz: there are other nations, guatemala, et cetera. what advice could you give to those nations who are really struggling with what is going on, maybe what they are doing wrong and what they could do correctly? >> the problem is a very complex one. there is no single measure but many different policies that have to be adopted. in fact they are doing some things in the right direction but they have to do more. liz: another day in davos. more meetings i'm sure. we're delighted to have you here. laura chinchilla is the president of costa rica. back to you in in new york. david: thanks very much, liz. tomorrow "after the bell" we'll have much more from liz claman. she will speak with cantor fitzgerald ceo, howard lutnick and prime
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minister of haiti and ceo of novartis. sandra: apple's disappointing forecast, just now analysts are cutting their targets. that is up next. we have one that actually downgraded his rating a week ago. find out why and what his biggest concerns at this point are. ♪
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sandra: apple's first quarter earnings report disappointed investors triggering more than 15 analysts to downgrade the stock. we have now got an analyst who was ahead of the game. he cut his rating last week. david: what did he say that other analysts missed? andy hargrave, pacific crest securities senior research analyst. congrats, to you, andy. i have to throw out reverse kudos to people like jeffries. they cut the price target to 500 from 800. socgen doing same thing. deutsche bank. this is not some little stock where you see the dramatic ups and downs. this is the biggest, used to be until today, was the biggest stock in the world. how can you have one day to the other 0% price target
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drop? where were these analysts? >> you will have to ask them that. david: i mean, let me refine that question a little better. there are a lost stockholders of apple who say you know, to have that dramatic of a drop, a 40% target price in one day shows a lot of analysts were asleep at the wheel. do you agree? >> yeah. you know. quite honestly you have a lot of analysts believing in products that didn't exist. believing in growth numbers that weren't real, or were never going to be real based on the amount of money that exists in the world. you had a lot of expectations, you know, that the greatest of companies of all time couldn't meet. sandra: all right. let's focus on you though, andy. you were somebody who did warn investors and those that follow your research. going into the report yesterday, the average analyst had a buy rating with over $700 price target.
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you did send up a red flag and warned investors. you lowered your forecast going into this. what flagged you? quite honestly we've been working on thesis of high market saturation for a couple of quarters. what happened we continued to see evidence pile up that was the case. when you combine that which means you will have lower unit volume what we saw as declining gross profit per unit at apple, it becomes extremely difficult to grow. so we looked at, all the evidence we could wlect and we couldn't justify and outperform rating. fortunately for us that turned out to be for our clients at least accurate today. david: look at overall strategy apple had. they had breaks through products that weren't cheap. steve jobs introduced them all. they were very expensive products. now they seem to compete on price, trying to get in there with cheaper phone or ipad that still was priced wrong or appeared to be
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priced wrong. is that a mistake strategically for apple to be trying rather than coming out out with break through products with a premium on price, trying to compete with the price level at the bottom? >> yeah, there are two components to that question. the question of one whether there is breakthrough product that can make a difference anymore. part of that is the iphone has become so massively successful it is hard to move the needle, if you're not driving higher iphone units. the other part is, you know, they haven't really introduced a cheap iphone the cheapest iphone on wholesale basis about 450 bucks that is still pretty expensive for a phone. on the ipad sideñ reality there was a market for 7 inch phones or 7 inch tablets or 8 inch tablets and if they didn't go there they would lose out on the market segment. so that was a a move i think they had to make. sandra: if you were able to warn investors before this dismal report where do you stand now? i said jokingly yesterday, what will apple do now, make a mini, mini ipad?
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what does tim cook have up his sleeve? where do you are you on the stock now? >> nobody knows what he has up his sleeve. our position is becoming more difficult to grow gross profit through hardware alone. they need to find more revenue opportunities through software and services. the problem with that hardware is so massive for them it outweighs the software and services profits by about 20 to one. you need a lot of growth there before you can offset any declines on hardware side. sandra: we have to leave it there, andy. your price target right now? >> we don't have price targets on sector perform stocks. we see fair value in a year at 420 to 502 -- 520. sandra: thank you, andy hargrave. david: hope you're up earl at 5:00 a.m. liz claman is up with bill graets in a live interview from davos tdd# 1-800-345-2550 you should've seen me today.
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